Alabama Proposed Regulations Can Impact Sales & Use Tax Liabilities for Businesses

On April 30, 2013, the Alabama Department of Revenue issued a proposed regulation which, if approved, drastically changes a seller’s responsibility to collect county and municipality sales and use tax. This regulation attempts to overturn 40 years of legislative history and if enacted, will require businesses to devote more administrative efforts to tracking “sales” throughout the state.

This new regulation is a major departure from the current local nexus requirements. Currently, a seller must have regular solicitation of sales in the jurisdiction to create nexus. The new regulation provides that having an employee or other representative in the jurisdiction “for any purpose” will create nexus. Some examples of items that could create nexus under the proposed regulations are:

• Distributing catalogs
• Contracting with a broadcaster or other advertiser
• Soliciting orders for goods or services
• Delivering merchandise (whether by company owned vehicles or common carrier)
• Handling complaints
• Making repairs
• Engaging in trade shows

The regulation is set to become effective on October 1st to coincide with the roll out of the new ONE SPOT sales and use tax e-filing system by the Alabama Department of Revenue.

The Department of Revenue will accept written comments on the proposed regulation until June 11, at which time it will hold a public hearing in Montgomery. If you have any questions on how this proposed regulation could affect you and your business, please contact your Warren Averett advisor.